WPP PR Revenues Up 2.3% In 1H 2014

LONDON—Public relations and public affairs revenues from WPP's PR firms grew 2.3% in the first half of 2014, following an improved second quarter performance.

The group — which owns H+K Strategies, Burson-Marsteller, Ogilvy PR and Cohn & Wolfe, among many other PR firms — reported PR revenues of £435m in the first half of 2014, representing 2.3% growth on a like-for-like basis compared ot the same period in 2013.

The results would appear to confirm that WPP's PR unit has returned to growth after a 'tough time', in the words of CEO Sir Martin Sorrell.

However, the proportion of overall revenue accounted for by WPP's PR and PA firms has slipped to 7.7%, down from 8.5% one year earlier. Margins have recovered to 15% after declining to 13.2% in the first half of 2013.

Like-for-like net sales in 2Q 2014 were up 3.5%, a considerable improvement over first quarter growth of 1.9%. In addition, PR/PA constant currency net sales margins improved by 1.9 margin points and by 1.8 margin points on a reportable basis.

Sorrell noted that his reflected stronger growth in North America and the United Kingdom, singling out "Burson-Marsteller, Cohn & Wolfe and the specialist public relations and public affairs businesses" for specific praise.

Overall, group revenues were up 2.7%, on a reported basis, to £5.5bn for the first half of this year, with profits up 1.5% to £532m. On a constant currency basis, headline pre-tax profit increased 15.6%, reflecting the impact of a strong UK pound on the group's results.

Sorrell again noted continuing concern over 'known unknowns', focusing on four 'grey swans': Eurozone fragility; Middle East prospects; the slowdown in China and the BRIC markets; and, the US deficit and debt.

In addition, Sorrell said these issues have been heightened by three "unknown unknowns": Sino/Japanese tensions; the Ukraine crisis; and, the Iraq and Gaza conflicts.

"All in all, whilst clients may be more confident than they were in September 2008, they broadly remain unwilling to take further risks, particularly given so many political flash points," said Sorrell. "They remain focussed on a strategy of adding capacity and brand building in both fast growth geographic and functional markets, like digital and containing or reducing capacity, perhaps with brand building to maintain or increase market share, in the mature, slow growth markets."

'In addition, in a sub-pre-Lehman trend world, they understandably, but perhaps inadvisedly, remain focussed, on achieving their profitability objectives by cutting costs, rather than by growing the top-line," continued the WPP CEO. "The recent surge of merger and acquisition activity, although to some extent driven by tax considerations, may reflect a concern that cost reduction opportunities may be close to being exhausted and that growth by acquisition may need to be tapped."